Senator BACK (Western Australia—Deputy Opposition Whip in the Senate) (13:23): I wish to make clear and confirm the statements of the shadow minister, Senator Colbeck, that the coalition is strongly committed to addressing the trade of illegally sourced timber and timber products coming into this country. Contingent on the government being prepared to accept amendments that will put a reasonable time frame on this legislation, the coalition would go forward in supporting it, but in its present form and within the present time frame it will not.

I also understand that the industry itself is strongly in favour of continuing to work with the government to restrict the import of timber products sourced from illegal logging activity. But, again, industry is pleading with government for a round of consultation, both within Australia and with the countries that import timber and timber products, to ensure that the legislation is workable and that we can maintain good relations with those countries with whom we trade. The concern, both from this side and from industry, is that the bill in its present form is not going to achieve that—that it is bureaucratic and probably unworkable. And that is the role of people in this chamber: to assist the government to end up with legislation in final form that actually does make it workable and not so bureaucratic that it cannot be introduced without unnecessary imposts on industry.

I want to investigate for a moment the size and scale of the issue, if we can rely on ABARES data—and I am sure we can—as well as the relationship with our regional neighbours, particularly Malaysia, Indonesia, Papua New Guinea and to some extent China. They are the ones who will be most adversely affected should we not deal with this legislation and this consultation process in an expeditious and statesmanlike way—and we are at risk of not doing that. One of the concerns expressed to me by industry representatives is the whole question of due diligence in how they comply with the legislative requirement. Once again, we will be examining what the role of government and of government departments will be in that due diligence process. Once again, we just cannot leave this to industry without ministerial and bureaucratic involvement, and I wish to address that issue if I can. The bill is seen by many to be inconsistent with this government's commitment to cutting green tape and improving international trade efficiencies. Concern has been expressed that sufficient time has not been given to suppliers, particularly in South-East Asia, and that the timber product legality systems that have been under development would be accepted under the bill. And of course we then find ourselves at variance with some other countries of the world who import quite legally and for whom there is no question about the probity of the source of the timber and timber products. So the bill runs the risk of making timber products in this country less competitive against other building materials that are, as we know, less environmentally friendly.

But returning to the scale of the issue itself: ABARES data suggests that about 10 per cent of timber products imported into this country come from those countries that would be under some question mark—Indonesia, Papua New Guinea, Malaysia and to some extent China. If another basic assumption is correct—that up to a quarter, or 25 per cent, may be the subject of illegal logging—then we are looking at an issue involving 2½ per cent of the timber and timber products that come into the country. By definition, then—and by deduction—we know that 97½ per cent of the total volume of timber product into Australia, if you accept that figure of possibly a quarter being the subject of questionable source, is legally introduced into this country. And there is not and never has been an issue. So if we are dealing with legislation that is in some way going to put at risk that relationship with those countries, that is something we should examine, and I propose to do so.

The Joint Committee on Foreign Affairs, Defence and Trade examined this very issue. I will quote from two submissions made, respectively, by New Zealand and the United States—countries that are not under any suspicion in this. The New Zealand Institute of Forestry said:

The lack of definition of “regulated timber products” (until prescribed in regulations) adds to the difficulty of interpreting the definition of “illegally logged” and to the development of due diligence processes between importers and their exporting counterparts in other countries.

New Zealand are the largest of the importers of timber and timber products into this country, and I think the point they make should be reasonably taken on board by legislators here in Australia.

If I can, at the same time, refer to a brief quotation in their submission from the American Hardwood Export Council, they said: 'The council believes many of the trade related objections to the bill could be dealt with through outreach activities.' So we have evidence from countries with whom we have safely dealt for many years—countries that are under no threat, under no impost and under no cloud—saying to us that there are other mechanisms we can use.

I now turn to this relationship with countries in our region over whom there is the suspicion or the knowledge of illegal timber or timber products coming into this country—specifically, Indonesia, Malaysia, Papua New Guinea and to some extent China. It is only in the last few weeks that we have had the government referring to Australia as being in the Asian century. This provides us with the opportunity to define what we mean by that statement and what role we want to take. I do not think it is to the advantage of this country in its relationship with those in the region to be using a sledgehammer to crack a nutmeg in the way that we are.

I refer to submissions to the Joint Standing Committee on Foreign Affairs, Defence and Trade. The submission from the Ministry of Trade of the Republic of Indonesia makes a couple of very important points that this chamber should consider. It states:

The negative impact on trade should also not be underestimated bearing in mind that timber products commonly have long and complex chains of supply with mixed sources from different locations and different kinds of timber.

It goes on to say:

It is for this reason that the GOI has recommended the deferral of the legislation until 2015 to provide time to ensure the legislation will not have unintended consequences that will unnecessarily harm the mutual trade between our two nations. Furthermore, the three years of adjournment will provide time for proper consultation between both countries including detail clarification as well as period of adjustment for the Indonesian producers/exporters to comply with the regulation.

Again, that is a plea from our nearest neighbour—one of our largest trading partners—with whom the trading relationship over the last 12 months has been strained.

There are ample opportunities there in which we should move cautiously, in which we should take on board the advice of those who have submitted to the government and to various committees examining this particular situation—we are dealing with a circumstance possibly involving 2½ per cent of the product that is introduced into this country.

I come then to the imposition on Australian industry and Australian importers of timber and timber products. The proposed regulatory apparatus associated with this bill appears, in fact, to be contrary to the government's free-trade direction and commitment to reducing green tape. Estimates have been made that the cost of regulatory compliance as a percentage of the imported wholesale value of timber products to Australian larger importers, assuming an efficient legality verification compliance mechanism is in place—and I will come back to that—would be of the order of 2½ to 4½ per cent. That is for larger importers.

The percentage cost of compliance for smaller- and medium-sized businesses importing complex, composite products—with long supply chains right back to the grower at the point of harvest or from other countries or importing myriad product types, with each product or shipment being very small—will be immeasurably higher. In this economic climate there is such pain in the business community, reflecting itself in a lack of confidence or investment, regrettably in a circumstance of not adding new employment; indeed, they are having to put some employees off. The last thing we want to do is introduce unnecessary burdens that will further put those circumstances at stress and at risk.

It is not yet completely clear how the due diligence process will work. This is a point of immeasurable concern to industry. How does an importer comply? Is it sufficient to rely on the advice of the exporter or of a middle business associated with the exercise in the supply chain? The answer is no. The Australian importer must have their own due diligence, must satisfy themselves that there has been compliance with local laws in countries such as Indonesia, Malaysia, Papua New Guinea and China.

I ask the question, in the absence of better advice from the minister and the department: just how does an importer satisfy themselves and therefore satisfy independent scrutiny that they have undertaken that due diligence? None of that information, that due diligence process, has been released by the minister or by the department. Therefore, importing businesses in Australia are not unreasonably concerned. My own experience, limited as it is, was to observe the logging industries in Sarawak and Sabah. I can assure you, having seen what I saw and having followed up on some of the comments of Senator Xenophon a few moments ago—and I have no reason to disbelieve him, having observed what I did—as an importer, I would not like the task of going right back through the supply chain to observe for myself the compliance. Therefore, how do we deal with this matter better? We deal with it by allowing an extended period of time for consultation and we allow for a better process, a process of multilateral negotiations and liaison, a process of examining what has been undertaken successfully in Europe and the United States. We know that there have been failures in legislation and in procedures, even in such a developed country as the United States, when it comes to compliance.

The spirit of the legislation is fine but the timing is not appropriate. The mechanism by which the government is going about the process without adequate consultation and without examining alternative mechanisms is putting at risk our relationships with our nearest neighbours. They are the countries with whom, if we are to engage in the Asian century, we need to be engaging. I urge caution and I urge delay. I urge that we go through a process of consultation so that we can look at alternative ways of assisting these countries to comply. In the same way we can assist our own importing companies to ensure that, when the legislation is passed in whatever form, there are processes for due diligence that they know about, that they can comply with and that will not end up causing their businesses to fail or be significantly reduced to the extent that they become uncompetitive and allow other less environmentally friendly products to be used in the building and construction industry.